Feb 29, 2020
12 notes on the impact of the Coronavirus by Goldman Sachs
The Feb. 28, 2020 episode of the Exchanges at Goldman Sacks podcast was obviously dedicated to the Coronavirus and the impact it’s having on markets. Here are some things I feel are worth noting down:
1/ This is the fastest slide into a correction since 2008
2/ Monday was the worst day for the S&P in over 2 years
3/ China represents 17% of global GDP which is 6 times bigger than it was during the SARS outbreak in 2003
4/ Sales into China for US corporates are at around 2% of S&P revenue exposure so the impact of the virus is affecting mainly the supply chain
5/ 37% of S&P management teams mentioned Coronavirus in the latest quarterly earnings calls
6/ In recent history pullbacks in the S&P have been short lived so everyone is getting ready to buy high quality S&P companies
7/ On average the S&P pulls back 12% in any calendar year so what happened so far is not dramatic
8/ Gold has been in steady upward trend since last year and it just broke $1600 per ounce
9/ Gold is used by investors for safety in relation to the Coronavirus outbreak but also due to scarcity of safe heaven assets given how low sovereign rates are globally
10/ The yield gap (equities-bonds) has moved well above 4% so equities remain attractively valued relative to bonds regardless of P/E ratios
11/ It is very challenging to get good returns in the public market outside of equities right now (investors use the keyword “TINA” — There Is No Alternative)
12/ Goldman has lowered expectations for the S&P and the VIX index that monitors investor expectation for volatility shot to almost double it’s normal rate this week
